Tuesday, March 31, 2009

In a previous post, I discussed a 17 year old psychiatric patient in Melbourne who was refusing to drink water because he was convinced that if he drank water, millions would die from drought caused by climate change. Doctors deemed the case to be the first known instance of "climate change delusion".

Here is a post by British journalist Peter Foster, living in Beijing, recounting a story in which his son admonishes him not to waste water:

"Dad," he said, in that tone of voice his parents reserve for telling him off, "The shower is running. The water's getting wasted and we can't waste water in the city."

Foster then takes us on a bipolar journey through his warring psyche as he contemplates the dire fate of the children:

It was a moment that left me feeling initially depressed, then slightly proud, then faintly hopeful, then depressed all over again. Let me explain.

Depressed? Well, it's a sign of the grim times for our planet when pre-schoolers are worrying about something as basic as water, a commodity which my generation never even thought about at his age.

When I look at my kids like my son and wonder what kind of place the world will be when they are my age - about 2050 - I find myself wondering if me and my family shouldn't just open the balcony doors of my 16th floor apartment and do the planet a favour by jumping out.

Here we have an educated professional man with a wife and three kids openly contemplating the suicide of his own family in order to "do the planet a favour". What could explain such a psychotic reaction? Is this man suffering from "Climate Change Delusion"? I will leave that to the psychiatrists, but in my Climate Change Delusion post, I argued the following;

Students are being thoroughly immersed in environmentalist propaganda from a young age. They are taught that nature is intrinsically valuable, i.e., that nature is a value apart from man. Since man's nature requires him to transform nature if he is to survive, this doctrine regards man as inherently evil. This "original sin" concept is the essence of environmentalism...

...Just as those indoctrinated into a cult, a religion, or any philosophy which holds that man is evil and that the standard of morality is sacrifice, the budding environmentalist will be racked with guilt, uncertainty, and fear.

Just as Catholics are famous for the adult psychological consequences of guilt instilled at an early age, now environmentalist children will suffer the same fate - for the same essential reason. In other words, the Catholic concept of Original Sin holds that man is a sinner by nature which requires life to be spent in perpetual self-punishment (penance) to atone for this wrong doing. Similarly, as cited above, the environmentalist views man's nature as essentially evil which must lead to the same type of psychological effect. Quoting from my past post:

If one takes the tenets of environmentalism seriously, every action by any man necessarily impinges on the intrinsic value of nature. The basics of life such as eating, drinking, and shelter require consumption of plants and animals and the procurement of materials drawn from nature. Even the act of exhaling results in the emission of the satanic carbon dioxide gas, not to mention the higher forms of technology which entail the burning of fossil fuels or the fission of atoms in a nuclear power generator. To such a mind, literally every form of human action would have to be regarded as evil. The cumulative emotional effect on such a mind must be devastating...

Now if Catholics and Environmentalists would follow the lead of St. Anthony and keep their asceticism to themselves by say retreating to the desert for twenty years or by really jumping off balconies - I really wouldn't care what they think. But they don't retreat to the desert do they? No, evidently misery does love company as they want us all to suffer with them.

Foster makes another telling claim - lamenting the "grim times" that require pre-schoolers to worry about something as "basic as water, a commodity which my generation never even thought about at his age." First, he is living in Beijing - where price controls enacted by the communist state cause shortages for a vast array of goods and where individuals have no remedy against private property violations (such as pollution) caused by state owned enterprises. Second, in the developed world, when has water ever been more plentiful than it is right now? We have the technology to bottle, purify, transport or even desalinate (if need be) water on a scale unimaginable even a few decades ago. In fact, in America, you can go to Las Vegas (a desert) and watch one of the largest water shows on earth in front of the Bellagio Hotel every hour - then go inside and receive free drinks all night. Is this worse than it was one hundred or two hundred or a thousand years ago when people died of all manner of diseases, starvation, and lack of water? When exactly was this past golden age when no one thought about or worried about basic commodities like water? It is only in recent times as a result of technology and capitalism that we don't worry about water anymore - the same technology and capitalism that are under attack by environmentalists.

(As an aside: I remember seeing an environmentalist cartoon which I think captures the essence of the environmentalist mentality. It showed a kid brushing his teeth while simultaneously showing a pond with a fish. As the kid left the water running, it showed the pond draining and the fish evaporating (or something like that) - the message ostensibly being to not leave water running(?). My question then as now is: where does the water go when it goes down a drain?Does it literally disappear as this cartoon seemed to indicate? If you leave water running, does the water get sucked into space and sent away to a far off galaxy? The water goes down the drain, through a sewer, where it is usually treated and then dumped back into a lake or somewhere other than space.)

If Foster is truly worried about the water then he should move from Beijing to a developed country (without price controls) and/or support private property, technology, and capitalism, right?

The fact that my rising five-year-old is already concerned must be a hopeful sign for the future. His generation is, out of necessity, going to have to be conservation-minded. It's never too early to start, even for those privileged to grow up in an environment where they do have clean water to drink.

Depressed again? I'd love to believe in the potentially transforming powers of a collective water-consciousness among the new generation, but then I look around and find myself swamped with the hopelessness of it all. [emphasis mine]

Is it really "a hopeful sign" that five year olds are worried about water? I would say that is a bad sign. Is it really "privilege" that accounts for clean drinking water? Are some just lucky enough to be in a "clean" environment and some are not? Are Americans just lucky and privileged to have clean water available - do they have a "collective water-consciousness" or is abundance due to good ideas like the rule of law, private property, free markets, the profit motive, and the pursuit of happiness? He goes on:

I hope I'm wrong, but I suspect that when the planet is down to its last few drops of H20, the policy-wonks, businessmen and politicians that make the decisions that really affect water policy will still be sat in conferences drinking Perrier.

As the Chinese environmentalist and campaigner Ma Jun wrote recently about a spate of chemical pollution incidents in Yancheng in Jiangsu Province in eastern China, the attitude prevails that it's okay (and inevitable) to make a mess now in the name economic development - 'better to be poisoned than poor', to coin the media slogan.

As he points out: "It is mostly the officials - who can afford to drink bottled water, live apart from polluters and eat uncontaminated foods - who think it is best to run the risk of dying. It is vulnerable social groups who suffer most from water and air pollution.

If he is really hopeless over the idea that the all powerful communist Chinese government can wantonly poison its own people and deprive them of drinking water - does it occur to him that the solution might be freedom from the Chinese government, i.e., supporting individual rights and capitalism? Does it occur to environmentalists who supposedly decry the conditions in third world countries dominated by corrupt statist dictatorships that relinquishing more power to the state in developed countries will result in corrupt statist dictatorships? The answer is that the environmentalist is above such concerns. His concern is the planet not man. Capitalism results in prosperity and life. The more human beings that get wiped out the better.

As for poor Foster who on some level does seem genuinely concerned about his children - when he is on the balcony with his family ready to jump, someone yell into the bullhorn: "Just come down and we will tell you about individual rights and free enterprise...really, I have a whole case of Aquafina right here..."

Monday, March 30, 2009

I first heard about the existence of http://www.financialstability.gov/ in an EconBrowser.com post here. I hear the term "stability" used constantly, mostly in a foreign policy context as in "we need to promote stability in a particular region" and it always confused me. Now we are hearing this concept applied to the economic system, namely, that the state must now provide us with financial stability. It prompts the question, what is "stability" in this context, and is it the government's function to provide it.

Stability can be defined as "firm and dependable; subject to little fluctuation". So, what exactly do the politicians mean when they say that they seek stability? Do they not want fluctuation? They could achieve such a result by threatening to jail anyone that moves - an approach which everyday seems to be more of a reality. Such an approach would result in very little fluctuation. In the sense that the government's policies are destroying the economy, increasing unemployment, and causing producers and investors not to deploy capital - the government's plans are resulting in very little fluctuation. People are not working and the stock market goes down by almost the same amount every day! In this sense, the economy is highly stable.

But is this what the government desires?

In the proper sense, "stability" should mean a system of intelligible laws that are consistent with individual rights, viz. laws that define and uphold contracts, protect private property, a judicial system of common law to provide a basis by which to settle disputes, and a criminal justice system to prosecute and jail those that initiate force or commit fraud. Such a system provides a known legal framework by which one can plan future activities and enter into contracts without the threat that the rules will suddenly change, e.g., one day the government decides that private property rights will no longer be recognized and begins nationalizing major industries.

Accordingly, in the area of finance, not only would it be crucial for the state to uphold contracts and private property, it would be essential that the government recognize and uphold a medium of exchange (money) chosen by market participants which contracting parties could deem acceptable as final payment. This medium of exchange in virtually all cases would be a precious metal such as gold or silver. Additionally, as the U.S. Constitution mandates, the government itself would have to remit payment in precious metals (as well as accept precious metals for payments.)

Such a sound or "stable" legal structure would form the basis for a system of actual laissez faire capitalism. It would be built upon a rational moral foundation consistent with the principle of individual rights and would lead to virtually unlimited economic prosperity and untold human happiness. Such stability would lead to massive economic fluctuations - but to the upside as innovation and wealth creation reached new peaks.

Is this what the government means by stability?

Clearly, the latter approach is not what the government means by stability as nothing they are doing could be regarded as in the direction of more dependable laws based on individual rights. In fact, virtually every legal principle as it relates to the economy has been thrown out the window and made subject to change on almost a daily basis. One used to be obligated to pay their mortgage - no longer. Companies used to go out of business if they ran out of money and couldn't pay their creditors - not today if you are big enough and have political connections. Contracts to pay bonuses used to have legal standing - maybe so until they change the tax law tomorrow which effectively seizes it. Once upon a time, the government had to tax or borrow money in order to spend it - not anymore - they just create it out of thin air.

If the government simply destroyed the economy by say exploding nuclear bombs all over the country, at least the consequences would be known, it would happen quickly, and those who survived could begin the task of rebuilding. From the proper perspective, the current approach is designed to result in almost maximum instability. Nothing can be known for sure except the government is going to do something. Meanwhile, everyone cuts back, employers hedge their risk by cutting costs which means terminating employees, and investors rather than funding new and exciting prospects, move to cash and what else - government bonds.

The financialstability.gov site says that it is "coming soon". I hope not.

Friday, March 27, 2009

A couple of interesting happenings on the Global Warming front. According to this report:

A United Nations document on "climate change" that will be distributed to a major environmental conclave next week envisions a huge reordering of the world economy, likely involving trillions of dollars in wealth transfer, millions of job losses and gains, new taxes, industrial relocations, new tariffs and subsidies, and complicated payments for greenhouse gas abatement schemes and carbon taxes — all under the supervision of the world body.

The purpose of the Petition Project is to demonstrate that the claim of “settled science” and an overwhelming “consensus” in favor of the hypothesis of human-caused global warming and consequent climatological damage is wrong. No such consensus or settled science exists. As indicated by the petition text and signatory list, a very large number of American scientists reject this hypothesis.

Publicists at the United Nations, Mr. Al Gore, and their supporters frequently claim that only a few “skeptics” remain – skeptics who are still unconvinced about the existence of a catastrophic human-caused global warming emergency.

It is evident that 31,478 Americans with university degrees in science – including 9,029 PhDs, are not "a few." Moreover, from the clear and strong petition statement that they have signed, it is evident that these 31,478 American scientists are not “skeptics.”

These scientists are instead convinced that the human-caused global warming hypothesis is without scientific validity and that government action on the basis of this hypothesis would unnecessarily and counterproductively damage both human prosperity and the natural environment of the Earth.

Tuesday, March 24, 2009

In my last post, I argued that violations of rights usually follow a pattern in which the government sets a precedent in a "special" situation that appears limited or temporary. The state then uses this precedent to justify even greater violations. Over time, such precedents serve the wider purpose of abrogating the concept of rights as such and logically must lead to tyranny. This is most recently evidenced by the virtual disappearance of private property rights. In the same fashion, the government now appears to be taking aim at a right without which civilization is doomed - the right to think.

In a past post, I argued that if freedom of speech were to be abrogated in the United States, it would be the final straw for advocates of freedom and should lead to an all out revolution. This is because without the freedom to think, all other rights are meaningless. Quoting Ayn Rand:

Since knowledge, thinking, and rational action are properties of the individual, since the choice to exercise his rational faculty or not depends on the individual, man’s survival requires that those who think be free of the interference of those who don’t. Since men are neither omniscient nor infallible, they must be free to agree or disagree, to cooperate or to pursue their own independent course, each according to his own rational judgment. Freedom is the fundamental requirement of man’s mind.

The AynRandCenter for Individual Rights recently posted Taking Free Speech for Granted which mostly dealt with an Iranian case but also mentioned the threat posed by campaign finance laws. Related to campaign finance law, there is an incredibly important case in front of the Supreme Court that could determine the fate of free speech and therefore, civilization itself.

The case involves the campaign finance laws’ distinction regarding political “ads” versus political “speech”. Since the campaign finance laws give the federal government power to regulate political ads and contributions to campaigns, the case revolves around the question of when a movie or any other form of speech is actually an “ad” and when it is just “speech”.

Government lawyers argued that conservative group Citizens United's 90-minute documentary "Hillary: The Movie" is a political ad just like traditional one-minute or 30-second spots and therefore regulated by the McCain-Feingold law, the popular name for 2002 revisions to the nation's campaign finance laws.

How does one make this distinction? It is functionally impossible to do so. Any book, movie or speech of any kind about a political figure could be construed as an “advertisement” in the sense that it provides information or an opinion that could influence a voter. Fortunately, the justices asked the appropriate question:

But if the federal government can treat a movie like a political advertisement, then why not books, the justices asked.

And what was the government’s response?

It can, answered Stewart, "if the book contained the functional equivalent of express advocacy," the test used in regulating broadcast, cable or satellite communication released 60 days before a general election or 30 days before a presidential primary or convention.

That answer seemed to concern the justices. What about electronic books, like those used on Amazon's Kindle reader, justices asked. Yes, Stewart said.

What if Wal-Mart wanted to run ads touting an action figure of a political candidate, Chief Justice John Roberts asked, could that be regulated? "If it aired at the right time, it would," Stewart said.

Unfortunately, it appears that the defense is taking an unprincipled approach to this issue. Rather than showing that the entire premise of campaign finance laws represents a violation of the First Amendment, they appear to be making the pragmatic argument that this particular movie is not an instance of an “ad” or "express advocacy" as defined by the law.

Olson argued that campaign finance laws should not apply to the movie at all, calling it a "long discussion" that "informs and educates" interested people on Clinton's qualifications and record.

Naturally, this pragmatic approach will not “work” in the long run, because the movie is certainly anti-Hillary and to argue otherwise is virtually ridiculous. However, that should be beside the point. In principle, the freedom of speech means that anyone has a right to say anything they want about a political candidate at any time. Not surprisingly:

That argument did not seem to sway several of the court's liberal justices.

Several justices quoted from the script, which is filled with criticism of the former first lady. It includes Dick Morris, a former adviser to President Bill Clinton who is now a Clinton critic, saying the one-time candidate is "the closest thing we have in America to a European socialist."

What form of political speech is not, effectively, an “appeal” to voters? Under this standard, everything that is said by anyone could be construed as an "advertisement" and banned. Of course, the practical effect will be that whichever party is in power will interpret speech critical of their policies to be "advertisement's" subject to felony imprisonment (violations of campaign finance laws are felonies) and any favorable speech as protected political speech. Such a precedent would have a chilling effect on all political speech and would virtually overthrow the First Amendment.

Note, the seeming irony that it is a liberal administration offering this argument and it is the liberal justices who are in favor of such bans. Usually, censorship is associated with the Religious Right and it is the so-called liberals who are at the vanguard of the free speech movement. As I argued in my post Modern Intellectuals at the Gate regarding so-called hate speech codes being promulgated by the left and in a different context in my post Anti-Anti-Communists, such violations of rights are entirely consistent with and in fact necessitated by the Left's ideology.

As discussed previously, the case being heard regarding the campaign finance laws represents yet another “trial balloon” being floated by the government which would set a precedent for broader restrictions on speech in the future. The only hopeful statement I can wring from this article was the following:

Arguing that a movie and a campaign ad are the same could have adverse consequences for the McCain-Feingold law, Justice Anthony Kennedy said. "If we think that the application of this to a 90-minute film is unconstitutional, then the whole statute should fall," Kennedy said.

Given the torrent of frightening news related to the abrogation of freedom in America, it is hard for me to be even taken aback anymore. Then I read this article in the Washington Post.

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

But not to worry:

The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan.

So the Treasury secretary would merely have to deem a firm a potential threat to the "broader economy" in order to seize the firm. And who decides this vague and arbitrary standard? He would have to "consult" with the President and get approval from the Federal Reserve Board, an unelected board whose chairman is nominated by....the President.

Once again, we see the devastation wrought by the rejection of reason and principled thinking in favor of pragmatism. Note the line stating that at present the government only has the powers to seize banks. Is it shocking that if the government was given the power to seize banks that it would only be a matter of time before it sought to seize any financial institution?

This is the pattern of virtually all abridgements of our rights. At first, the government only seeks a limited intrusion to be applied to a small sub-set of individuals or firms and only under special circumstances. Individuals and businessmen especially, unable or unwilling to think in principle, do not see the broader implication of the new policy, and since it appears to not directly affect them right-now-this-minute, they either do not object or are willing to compromise. Of course, granting the government any power sets a precedent, i.e., establishes a justification to be used in the future. Therefore, when the government seeks a broader application of this power, the pragmatist is helpless to resist.

To resist such government policies would require the ability to think in principle. It would require the ability to understand the fundamental justification of a policy and the power to abstract the broader implications. It would require at least a cursory understanding of the nature of individual rights and the proper role of government. It might even require a knowledge of history to be used as a guide by which one can isolate similar events in the past and observe the consequences. In short, it would require the ability to reason.

And where would anyone obtain such an education today? The universities teach that reason is invalid, that objective knowledge is impossible, and that there are no black and whites. Therefore, economics today consists of the study of empirical relationships of quantitative data divorced from any general understanding or principles. History, they teach, is always biased by the historian and can only be seen through the prism of race, gender, and ethnicity. The history of the nation which brought about the greatest prosperity and happiness in world history is reduced to the study of the native American "genocide", slavery, and misogyny. Business schools use the "case study" method to reinforce the idea that the world is a stream of random concretes with no connection to one another. Psychologists tell us we are a product of our genes or environment. Moralists argue that ethics consists of self-sacrifice to God or in modern times, the "environment", and that man by his nature is a cancer to the planet. In short, the modern student is taught that principles are useless, everything is relative except that man (well, Western man) is evil and is destroying the planet, and his duty is to sacrifice.

Given the state of modern philosophy and its ripple effects throughout university curriculum's, is it any wonder that this country is in decline?

Jefferson was supposed to be the source of the quote: "The price of freedom is eternal vigilance" which is absolutely true. Vigilance means paying close and continuous attention and implies an ability to understand the broader implications of any action by the state. If man is stripped of his essential faculty, the reasoning mind, and told that it is useless to seek knowledge and abstract principles - if man is told that life is meaningless - if man is told that he has no control over his life and is a product of his genes or environment - if man is told that he is evil by nature and that his sole purpose is sacrifice and/or to minimize his "carbon footprint" - how can he be "vigilant" in this sense?

It is not the Obama's and Geithner's of the world that are responsible for our loss of freedom. The cause is a lack of "vigilance" brought about by the systematic attack on the efficacy of the human mind and therefore on individual rights. Nothing short of a philosophical revolution will allow and inspire vigilance once again.

Thursday, March 19, 2009

The U.S. Federal Reserve on Wednesday stunned markets by announcing it would pump another $1 trillion into the ailing U.S. economy by buying long term government debt for the first time since the 1960s and by expanding its purchases of mortgage bonds.

This comes on top of actions the Fed has already taken over the past year which has exploded its balance sheet to over $2 trillion including an increase in the monetary base of approximately $1 trillion. The Federal Reserves actions right now will likely have an impact for years to come and may even result in a total breakdown of the economic system. In this post, I hope to reiterate some general insights from past posts related to inflation and some technical insight to the more economically inclined.

For the non-economist, the analysis can be reduced to a simple principle: there is no such thing as a free lunch. Wealth results from production. Paper notes can be created which are contractually redeemable for wealth - such as a certificate that entitles one to a certain amount of gold. In that case, the paper would represent a form of money. But the process can not be reversed, as any preschooler could probably tell you. In other words, one can not create the paper out of thin air and then pretend that it stands for wealth. If you do not believe me, go to a deserted island, and bring paper with $100 stamped on it and see what it gets you. Amidst all the complicated machinations of the Federal Reserve and all of the technical jargon of professional economists, in reality, it is this simple.

The act of counterfeiting money, which is essentially all the Fed does, like any form of fraud, is incredibly destructive as I have discussed in past posts [1,2] which include links to the most comprehensive explanation of inflation I have found, Dr. Reisman's treatise, Capitalism (if you wish to study the economic effects of inflation further, I highly recommend Chapter 9, of Capitalism: A Treatise on Economics by Dr. George Reisman. A fully downloadable and searchable version of the book appears on the author's site and can be downloaded by clicking this link) . In a wider sense, inflation is an example of a principle that I have often quoted - Ayn Rand's principle that fundamentally, all evil is a consequence of the attempt to evade the law of identity, i.e., the attempt to wish that reality is not what it is. In this case, the Federal Reserve is wishing that the paper they create will actually function as real capital. Quoting Atlas Shrugged (by Ayn Rand, 1957, p. 960-961):

“And that is the whole of their shabby secret. The secret of all their esoteric philosophies, of all their dialectics and super-senses, of their evasive eyes and snarling words, the secret for which they destroy civilization, language, industries, and lives, the secret for which they pierce their own eyes and eardrums, grind out their senses, blank out their minds, the purpose for which they dissolve the absolutes of reason, logic, matter, existence, reality – is to erect upon that plastic fog a singly holy absolute: their Wish.

“The restriction they seek to escape is the law of identity. The freedom they seek is freedom from the fact that an A will remain an A, no matter what their tears or tantrums -that a river will not bring them milk no matter what their hunger - that water will not run uphill, no matter what comforts they could gain if it did, and if they want to lift it to the roof of a skyscraper, they must do it by a process of thought and labor, in which the nature of an inch of pipe line counts, but their feelings do not - that their feelings are impotent to alter the course of a single speck of dust in space or the nature of any action they have committed.

For the more economically inclined, the purpose of the following is not to discuss the effects of inflation which I have discussed before (links above), but rather to trace the actual steps the Fed has been taking to inflate the money supply. The actual mechanism the Fed uses is important in order to understand the practical consequences of its actions and to help avoid confusion.

In a previous post, I discussed recent Federal Reserve policy by analyzing changes in its balance sheet. I am not adding much to that analysis or to what the links offer. I hope I can clarify it a little and put the most recent news into that context. I primarily relied on several good sources for insight on this topic, which you can find in the original posts especially this one at Econbrowser. I also have found a few more sources which I will link here.[1,2,3]. If you want a primer to better understand the Fed's balance sheet see this. Here is a link to the weekly release of the Federal Reserve's balance sheet.

The essential way in which the Fed "prints" money is through a process known as "open market operations." The Fed purchases treasury bills (short term government bonds) on the open market (through its New York trading desk) from primary dealers. The Fed gets the treasury bills which are an asset and the dealer gets a credit from the Fed. In other words, the Fed creates money out of thin air to pay for these treasury bills. It simply tells the dealer that they now have a credit with the Federal Reserve bank which the dealer can use any way it wishes. If you look at the Fed's balance sheet, you will see holdings of treasury bills on the asset side. It then carries a corresponding liability in the "currency in circulation" line item to offset this. Currency in circulation is technically a "liability" on the Fed's balance sheet, but, of course, federal reserve notes are only redeemable in federal reserve notes so its really not a true liability.

Another aspect to this is that when the Fed purchases treasury bills and holds them, the U.S. Treasury is obligated to pay the Fed interest rather than a member of the public. This is important because the Fed can't keep profits, it turns over the earnings to the Federal government. So, in effect, the federal government does not really pay interest to the Fed. (Why doesn't the Fed just buy all the government debt? Because even they know it would cause a massive inflation. Again, the Fed would buy the debt with fake money and the monetary base would increase by orders of magnitude. They "print" money but historically have not done so in a way that would cause a Latin American style hyperinflation.)

As I noted in the previous post, this was a pretty straightforward process (albeit evil) until last year. To make a long story shorter, starting last year, the Fed wanted to bail out banks that were holding securities (mortgage backed bonds among others) that were quickly becoming worthless (and threatening these banks with bankruptcy). The Fed could simply buy this "bad" or "toxic" paper with fake money as described above but it knew that would be inflationary so it tried a few things first. First, it actually sold off some of its treasury holdings to raise cash which it turned around and lent to the banks through various programs with fancy acronyms like TAF and so on. In other words, it allowed the banks to pledge the bad paper as collateral in exchange for loans. This was legitimate. It sold an asset, got cash, and lent the cash to the banks. Fine. The problem was that it quickly began running out of treasuries and it realized that it would need to sell more than it owned in order to accomodate all of this lending. Where could the Fed get the money if it was no longer willing to sell its own assets? It created it out of thin air which had the effect of increasing bank reserves (by about $1T), however, it did two things to stop this increase in reserves from hitting the banking system and causing massive inflation.

First, it did a deal with the Treasury. The Treasury went out and auctioned about $500 Billion worth of treasury bills to the public. It thereby sucked $500Billion out of the system. It took this money and simply parked it in an account at the Fed. This program was called the "Treasury Supplemental" program. It is still a major item on the liabilities side of the Fed's balance sheet. Second, it began paying banks interest on "excess reserves" (reserves the banks have over and above their legal requirement.) The Fed had never before paid interest on excess reserves. This provide an incentive for banks to keep their money on reserve which kept the money from getting into the banking system. Also, usually, banks lend out money to one another in the inter-bank market. Banks became leery of lending to each other and they gladly began accumulating excess reserves at the Fed since they were getting interest. Now that the Fed Funds rate is zero, banks are effectively getting 0% interest on their excess reserves and paying out something to depositors meaning they are losing money. Apparently, they rather lose a little bit and keep their money at the Fed than lend it to companies or the public.

Therefore, the Fed has been increasing the monetary base (currency in circulation + reserves) by increasing reserves but not by increasing currency in circulation (currency in circulation has barely moved in the last year despite a $1T increase in its assets). However, it has not increased the effective money supply since the increased reserves have been parked at the Fed in the ways I described above. The Fed's balance sheet has ballooned as a result of this process meaning that its assets and corresponding liabilities have increased from about $1 Trillion to $2 Trillion.

This means the Fed has lowered the quality of its own assets (by replacing treasuries with worse credit paper), and put the taxpayers on the hook. The public faces more interest on the debt by virtue of it being held by the public, it faces the possibility of the Treasury having to raise more money through lending if the Fed can not pay it back, and it faces the potential of massive inflation if the excess reserves find their way back into the banking system.

That was all before the announcement referenced above. Yes, it gets worse!

The recent announcement implies that the Fed will be flat out buying $300 Billion of long dated treasuries in the open market. This is directly inflationary since it appears that the Fed will simply buy the treasuries with fake money as described above when discussing open market operations. The Fed also states that it will purchase up to another $1Trillion in non-treasury securities. And where will it get this money? Of course, it will create it out of thin air. How will the Fed keep this increase in reserves from getting into the banking system which then gets multiplied through the fractional reserve system? Will banks continue to sit on the excess reserves? That is the question. How they do this and when will determine the short run effects. The state of the markets will also have an effect. I imagine if the economy began recovering, it could unwind some of the paper it is holding and begin to reign in its balance sheet.

As Dr. Reisman points out, inflation is not increasing prices. Inflation is an increase in the quantity of money above the increase in precious metals. This is important because it helps separate cause from effect. There is no doubt the Fed is going to massively increase the money supply. Will it lead to a massive increase in prices? It is impossible to know for sure by how much and how quickly. The best indicator is the gold market and bond prices. If you follow the prices in those markets and integrate it with observing the weekly changes in the Fed's balance sheet - it can give you insight.

From an economic perspective, the government's actions are profoundly destructive. Rather than allowing banks and companies to fail and go through a proper bankruptcy along with corresponding reductions in prices and wages which ultimately would end the recession, the government is going to prop up banks and create money out of thin air. This is on top of the so-called "stimulus" package which will further increase the debt of the federal government, rob the taxpayer of his income, crowd out private capital, and create more pressure on the Fed to print money to keep interest rates low. Related to this last point, as the government continues its massive borrowing, there will be upward pressure on interest rates. The only way the government can stop this in the short run is by printing more money (having the Fed buy the paper with fake money). You would then have rampant inflation and rising interest rates.

Given the Fed's past statements, it appears that it will do anything to stop prices from falling (which it mistakenly believes is "deflation"). Some pundits have estimated that the Fed may have to take its balance sheet to $10 Trillion to have the desired effect. This is insanity. If it continues down this path, we could end up with a hyperinflation and a total economic collapse - something akin to Weimar Germany in the 1920's, i.e., rising fascism and runaway hyperinflation. It demonstrates another point which can be seen throughout the history of money and banking and in any real life situation in which you attempt to evade reality rather than take your medicine. The situation always gets worse and reality happens.

(I had more to say, but I'm depressing myself too much - need take a break....)

Monday, March 16, 2009

After my last post Knowledge in a Bottle, Seine commented (rhetorically):

As an aside, doesn't it say something about a persons evaluation of their own life's 'worth' when they expect someone else to pay to sustain it or begrudge the $50 needed retain that life?

It certainly does say something, but what is the root of this fact? It is a simple fact that people do not take care of things that they do not own, i.e., things for which they are not responsible. Of course, it is obvious that people do not drive around and randomly mow strangers' lawns. Why should they? It belongs to someone else and they do not have the right to trade or dispose of the item, i.e., they have no incentive. The issue of "public" buildings, e.g., a housing project or public bathroom, provides a different context but illustrates a similar principle. People have some incentive to take care of it since they live in it or go to the bathroom in it, but it is evident that people still do not take care of public facilities in the same way they keep up their own property.

I am not arguing that people should take care of things that do not belong to them. Quite the opposite. I think it is entirely rational not to care that much about things you do not own or have no stake in. So, if we can see that people do not take care of material possessions for which they are not responsible, why would this principle not apply to the ultimate material possession: one’s own life? It does apply, but, why would anyone believe they are not responsible for their own life?

Altruism is the doctrine that a man does not have a right to exist for his own sake and that sacrifice to others is the standard of morality. This doctrine dominates modern culture and is responsible for the notion that the pursuit of one's own happiness is evil. One of the consequences of altruism is that it implies that one is not responsible for their own life. If you are poor, you deserve other people’s money. If you are sick, a hospital must take care of you. If you are homeless, someone else must provide you a housing project. On the other hand, if you have any money, you must fund other people's well being. This doctrine is at the root of the welfare state and is used to justify the wholesale expropriation of wealth and the redistributive schemes of the nanny state.

If one believes that they are not responsible for their own life and others must take care of them, one's relationship to their person is similar to the relationship of the housing project resident to the housing project. Under the doctrine of altruism, one does not own their own life. They are not responsible for themselves. It is someone else’s duty to take care of them. Why work? Someone will send them a check in the mail or find them shelter. Why not abuse drugs and alcohol? Someone will take care of them. Why pay your mortgage? The government will bail you out.

Altruism leads to a kind of self-loathing irresponsibility. Your existence is a burden to others and you must serve others so it therefore creates a sense of guilt about existence. Because it upholds the idea that you are not responsible for yourself, it induces irresponsibility by definition. Why should you pay any money for a life saving prescription drug? Someone else should pay. And why won't that doctor treat me for free? He owes me. To the extent that a doctor or landlord seeks payment for his service, it is considered an affront to the altruist - such a pursuit exemplifies selfishness and greed. Since nature requires payment for a service or a product, the altruist is at war with the nature of reality. This combination of guilt, irresponsibility, and contradiction induces a sense of malevolence about the world - and a hatred of other human beings but mostly, them self. This, I believe, is why people in today's society, begrudge a payment of $50 for a live saving drug rather than regard it as a profound value.

Saturday, March 14, 2009

So many take modern medicine for granted, and one of the greatest tragedies of modern times is the extent to which the field has been strangled by government intervention (the European Working Time Directive is but a sample of what's coming soon to an American doctor near you). The number of doctors that have retired early or left the field in frustration and the number of brilliant minds that will never enter the field can not be calculated. Pharmaceutical companies who provide life saving cures on a daily basis are routinely vilified and threatened rather than honored and revered.

The history of medicine, like the history of any science, is long and arduous. What so many take for granted is the culmination of over 2,000 years of human effort. Just to get a small sense of this history, consider the picture above of Thomas Eakins' painting The Gross Clinic (1876) which I had recently posted in my sidebar. I found some further fascinating background on this picture:

This is an interesting period because anesthesia had been in use for 14 years when the war began but the concept of antisepsis would only appear two years after its end. At the beginning of the war, the US Army was tiny and scattered and the medical corps was in the hands of incompetents. For example, they had provided no textbooks to save funds. As the war began, Samuel Gross, a professor of surgery in Philadelphia, wrote his own textbook of military medicine in nine days. It was copied by the Confederates in 1863 and became their medical “bible” as well.

This painting of Gross in his surgery clinic is one of the most famous of American medical paintings. The procedure was one of draining an infected femur. Surgery in America, or anywhere else, in 1860 was very basic and few sophisticated procedures were even contemplated. You might also note the absence of any attempt at antiseptic practice. There are no gowns or gloves and the thought that contamination of the wound was a hazard was unknown.

Admired for its uncompromising realism, the Gross Clinic has an important place documenting the history of medicine—both because it honors the emergence of surgery as a healing profession (previously, surgery was associated primarily with amputation), and because it shows us what the surgical theater looked like in the nineteenth century. The painting is based on a surgery witnessed by Eakins, in which Gross treated a young man for osteomyelitis of the femur. Gross is pictured here performing a conservative operation as opposed to an amputation (which is how the patient would normally have been treated in previous decades). Here, surgeons crowd around the anesthetized patient in their frock coats. This is just prior to the adoption of a hygienic surgical environment (see asepsis). The Gross Clinic is thus often contrasted with Eakins's later painting The Agnew Clinic (1889), which depicts a cleaner, brighter, surgical theater. In comparing the two, we see the advancement in our understanding of the prevention of infection.

From these two paintings, one could see the rapid progress that began taking place in the 19th century. Going further back, here is a picture of Rembrandt's The Anatomy Lesson of Dr. NicolaesTulp painted in 1632:

This was painted only about 16 years after British physician William Harvey's monumental discovery of the function of the heart and pulmonary circulation (Harvey pictured below). This picture represents the state of medicine only 250 years earlier. Although medicine had certainly progressed, when viewing these 3 pictures, its fairly clear that medicine had not changed all that much relative to the kinds of exponential changes we have experienced in the last one hundred years. This fact should make us even more grateful for the medicine of today.

Another tragedy is the loss of 1,000 years of potential scientific progress due to the Dark Ages. During the 2nd Century A.D., while the mystic Christian cults via Platonism were beginning their spread through Rome and laying the groundwork for the eventual end of the classical Greek and Roman tradition - the great Roman physician Galen (pictured below) was researching and writing texts which would dominate the field for over a thousand years. As the West descended into the Dark Ages, Galen's texts were kept alive by Muslims and translated into Arabic. However, due to religious prohibitions on dissection, the Muslim's lacked interest in anatomy and did not advance his work significantly. It wasn't until the twelfth and thirteenth centuries, at the dawn of the Renaissance, that interest in anatomy was revived and Galen's works once again translated. However, as Marie Boas in The Scientific Renaissance 1450-1630 writes:

The real worship of Galen begins with the rediscovery of the Anatomical Procedures, and its commentary by Guinther (in 1531).

Andreas Vesalius, considered the founder of modern anatomy, would publish his famous De HumaniCorporisFabrica (On the fabric of the human body) in 1543, "known for its highly detailed illustrations of human dissections often in allegorical poses" (see picture below). Underscoring the loss of a thousand years during the Dark Ages, Vesalius would write (see Boas):

those who are now dedicated to the ancient study of medicine, almost restored to its pristine splendour in many schools, are beginning to learn to their satisfaction how little and how feebly men have laboured in the field of Anatomy from the time of Galen to the present day."

More than 50 years ago, a Michigan-based pharmaceutical company commissioned a Michigan painter to depict dozens of great moments in medical history, from ancient Egypt to the United States in the 20th century.

Within a few years, the entire nation knew the paintings by Robert A. Thom. Reproductions appeared in magazines and doctors’ offices, and a book of them was given to thousands of new physicians. With a Norman Rockwell-style realism, the works epitomized the optimism of the time in which they were painted, and the nation’s faith in post-World War II medical and scientific triumphs.

In closing, let me say that it always angers me when I hear people complain about the "cost" of drugs. Put aside the fact that government intervention causes drug prices to be higher than otherwise, and consider that in one antibiotic pill or in any of thousands of other medications there is condensed over 2,000 years of human effort and knowledge. All for what, usually 50 bucks or so? Please. This is a steal. The idea that altruism or self-sacrifice is the standard of morality is at root responsible for the hostility to freedom and capitalism - the system that acknowledges and protects the individual pursuit of happiness. Altruism and its consequence, government controls, not only rob the producer's of their livelihood and those that will never benefit from efforts never made, it robs people of a more subtle value. It takes from them the joy of appreciating and admiring human ingenuity. It substitutes a sneering contemptuous demand that others slave for their benefit, in the place of what should be a simple acknowledgement of a profound value - the value of exchanging 50 measly bucks for their life.

Wednesday, March 11, 2009

I think an important point has been reached in the struggle for freedom which is actually positive (believe it or not).

Marx's Communist Manifesto was published in 1848. What do you think the immediate reaction was of Western industrialists to his argument that capitalism would be replaced by a "classless society" after a transitional "dictatorship of the proletariat"? Yawn. As the West was exploding in a torrent of growth and the limits of prosperity and technological achievement seemed limitless, did anyone take some kooky German philosophy professor seriously?

Forty-two years after the publication of this book, the Sherman Anti-Trust Act was passed in the United States. Sixty-five years after its publication, the Sixteenth Amendment to the U.S. Constitution was ratified legalizing the income tax. In the same year, the Federal Reserve Act was passed nationalizing the banking system. The Bolshevik Revolution occurred in 1917 and Soviet Russia formed in 1922. The 1930's saw the rise of National Socialism in Germany, America's "red decade" including FDR's socialist New Deal policies, and the overthrow of the gold standard. Then came the communist revolution in the 1940's under Mao, the start of America's cold war with the Soviet Union, and a series of communist revolutions around the world. Today, as we know too well, despite the blood soaked catastrophe wrought by global communism, America is being directed down the same dead end road. So, what could possibly be positive?

I am not an expert in intellectual history, so I will not even attempt a detailed argument but merely sketch my argument.

These two great discoveries, the materialistic conception of history and the revelation of the secret of capitalistic production through surplus-value, we owe to Marx. With these discoveries, Socialism became a science. The next thing was to work out all its details and relations. [emphasis mine]

I think it is well known that Socialism was the system of the intellectuals. As the above quote demonstrates, it was considered scientific, i.e., associated with secular thought and reason. In addition to many academics in the social sciences, many prominent scientists were socialists. Atheism and the rejection of the supernatural followed from this "scientific" approach and was an essential ingredient of socialism's appeal. Consider this quote from Lenin's Socialism and Religion:

The proletariat of today takes the side of socialism, which enlists science in the battle against the fog of religion, and frees the workers from their belief in life after death by welding them together to fight in the present for a better life on earth.

My point is that socialism was a system that carried with it the prestige of science and reason. The opposition to socialism was anything but scientific. Capitalism's defenders mainly relied on arguments from tradition or religion due to most Americans' aversion to atheism, hence the epithet "godless communism." If the defenders of socialism were prestigious intellectuals and prominent scientists but the defenders of capitalism were folksy mysticists - which side do you think was likely to win?

Since the publication of Atlas Shrugged in 1957, I believe that a role reversal has slowly been taking place putting defenders of capitalism on the side of science and reason and casting the socialists as the folksy mysticists. We know that this is what should be, but are we there yet? There are some positive signs.

In the same way that 19th century defenders of capitalism could not counter the "scientific" arguments of the socialists, we are at a stage where leftist intellectuals (the new establishment) brush off scientific arguments supporting reason, egoism, and capitalism yet are unable to provide rational counter arguments. Hence, we hear statements like "how can we take these people [Ayn Rand fetishists] seriously" [1] offered in place of any substantial criticism The left has been intellectually neutered by their own dead end philosophy of unreason and subjectivism.

In fact, just like the Religious Right, the Left has rejected reason as a means of knowledge, and so the only alternative open to them is faith, i.e., belief in the absence of evidence or mysticism. Many socialists, like Obama, have turned to movements like Liberation Theology which fuses Christianity with Marxism described in my post At Least Pastor Wright Is Consistent. This trend was on full display at the Democratic National Convention which I described in my post The Religious Left.

Another example of the leftist trend towards mysticism is environmentalism. The entire environmentalist movement is a modern day pagan religion replete with an object of worship, Mother Earth, a modern day St. Paul (Al Gore), and a modern Council of Nicaea (the U.N. IPCC - Intergovernmental Panel on Climate Change) to define orthodox truth (see my post Pagans vs. Christians: The Sequel). Consider this brilliant excerpt from a Michael Chrichton speech which I have quoted many times [1, 2]:

Today, one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. Why do I say it's a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.There's an initial Eden, a paradise, a state of grace and unity with nature, there's a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all. We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability. Sustainability is salvation in the church of the environment. Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe."

It is fifty-two years after the publication of Atlas Shrugged. We are going through the "how can we take these people seriously" stage while Objectivism is making major in roads into academia and a grass roots movement of people who have had fifty-two years to think about Ayn Rand's philosophy is starting to emerge. Reason is on the side of freedom and capitalism and the left is intellectually bankrupt. Let's make the next ten years, the "amendments and acts" stage which we can lovingly call "The Good Deal".

Sam Barr writes a follow up post to his previous titled Still Not John Galt with more of the same. This time, I will let the commenters on his blog do the work. There are some great ones. For example, One guy writes:

God, you really are an intellectual lightweight. Fact # 1: The conservative-libertarian-Objectivist argument is that government welfare and controls is what's keeping the poor people in a state of dependence and poverty. Fact #2: News flash: there are lazy people in the world. They come from all socio-economic backgrounds. Fact # 3: There are really dumb people at Harvard.

Monday, March 9, 2009

I noticed this blog post titled, I'm Not John Galt, in the Harvard Political Review :

The conservative blogs are afire with Ayn Rand fetishism. Apparently, by raising the top marginal tax rate back to where it was in the Clinton years, President Obama is "punishing" the most productive members of society.

Au contraire. Here is my idea of "punishment." You take a person who was born into poverty, who was born without highly marketable skills, who lost out in the genetic and social lottery. Then you condemn him to rotten schools, with limited access to health care, with no security and therefore no freedom to take risks. And then you call him and others like him "the slackers, the entitled, the net tax consumers." To me, that's punishment.

But, hey, that's just my own sense of fairness. You might also be interested to know that the empirical evidence is on the side of angels: higher tax rates don't reduce productivity.

But some conservatives are trying to demonstrate the connection between high taxes and low productivity by causing it, that is, by inducing lots of people to "go Galt." In other words, they're trying to get people to punish themselves and punish society at the same time. How can we take these people seriously?

I thought that this piece represents, in short form, all of the major liberal philosophical premises and is thoroughly typical of the leftist argument against capitalism. Therefore, to the extent that these ideas are currently destroying the world, it is important to analyze them. One thing I have noticed about left wing intellectuals is that they rarely make an argument, i.e., they rarely state a premise and then analyze it or attempt to prove or disprove a claim. Rather, they dismiss the wide spread interest in Ayn Rand as "fetishism" or liken those devoted to reason and capitalism as "cultists" or "dogmatists". I believe that the source of this type of hostility is not directed at Objectivism per se but to reason as such and is a consequence of the modern philosophers' assault on reason.

In a previous post, I discussed pragmatism and quoted Ayn Rand discussing the consequences of this doctrine:

...this school decided that objectivity consists of collective subjectivism—that knowledge is to be gained by means of public polls among special elites of “competent investigators” who can “predict and control” reality—that whatever people wish to be true, is true, whatever people wish to exist, does exist, and anyone who holds any firm convictions of his own is an arbitrary, mystic dogmatist, since reality is indeterminate and people determine its actual nature. [emphasis mine]

To the modern philosopher (or left wing intellectual), everything is subjective, there are no black and whites, i.e. nothing can be proved. Such a doctrine results in the rejection of any objective standards and therefore gives rise to ethical relativism, multiculturalism, etc. This doctrine also gives rise to the false alternative between religion and subjectivism. In other words, if the world is unknowable and secular arguments unprovable then a man who seeks certainty in any field has only one alternative - belief in the absence of evidence, i.e., faith or religion. Consequently, the modern philosopher equates any principled approach to ideas with religious faith and dismisses it as dogmatic or simplistic and smears its adherents as "fetishists" or "cultists". Therefore, to any group who takes reason, logic, and principles seriously the writer is led to ask: "How can we take these people seriously?".

(Note that even religionists have bought into this false alternative in the context of the "intelligent design" argument. In other words, they claim that "reason" or science is just another form of religion.)

In the second paragraph he asks us to consider someone "born without highly marketable skills, who lost out on the genetic and social lottery." Such an approach represents the philosophy of determinism. According to this idea, people do not have free will - they are predestined by their genes and/or "environment". Note the false alternative implied by this typical "nature vs. nurture" argument. You are determined, this argument goes, the only question is how you are determined.

Leftists use this argument to justify expropriation of wealth. If one person arbitrarily has wealth and another does not - it must be due to chance factors. Therefore, the state must "level the playing field" by redistributing wealth from the haves to the have nots. This argument is used not only to justify "death" taxes like the inheritance tax but also to denigrate and vilify anyone who claims a right to their property or wealth. According to the writer, having your wealth expropriated by the state is not "punishment". To him, by implication, it is justice.

To start, man has free-will because he has the choice to think or not and therefore, to act or not. Second, determinism is an impossible position to hold logically as the fact of volition gives rise to the concept of truth and falsehood. For example, I assume that the post writer deems himself to be determined, so his genes and environment must have destined him to write this post. Consequently, how can he ask us to accept his claim as true? His statement has the epistemological status of a dog bark. It just happens. If one is not free to think or focus his mind, the issue of whether he is right or not is irrelevant. It is literally noise.

There is another aspect to this argument. Even if you accept that man has free will, it is certainly true that a child's upbringing and their physical attributes can make it more or less difficult for them to succeed. For example, a child whose parents provide education should have an easier time than one whose parents beat them or keep them in a dungeon. If a child inherits wealth, they would have an easier time becoming wealthy than one who doesn't by definition. So what does this imply? Is this an injustice?

First, wealth is produced. It does not just exist. The producer of wealth is its owner by right and by any rational definition of morality. If a man can not keep the product of his labor, he is a slave by definition. The owner may choose to dispose of his wealth in any way he sees fit. If he wishes to consume it, save it, or give it to his children, it is his choice. By what right, does this writer claim that one's wealth should be expropriated by the state? To whom should the wealth be redistributed and by what standard? Is there some sort of Platonic form of perfect "fairness" which must be met? If one child's parents tuck him in at night and another child's parents do not, should the child who was tucked in have his or his parent's earnings confiscated and given to the child who was not tucked in? The leftist argument is an inversion. It holds that it is an injustice not to have one's property seized by the government and redistributed. The forced confiscation of one's earnings and property by the state is a monumental injustice.

Ironically, in making this argument, the writer points to "rotten schools" and references "limited access to health care." The "rotten schools" are the product of the government's public education monopoly which results from the very system I assume he promotes given that he is opposed to capitalism! The same argument holds with respect to the health care industry which has been virtually socialized through market distortions related to government regulation and Medicare. Notice he is not concerned about any crisis in the shoe market or the hamburger market - industries which are relatively free of government interference.

If this writer is truly concerned about those born into poverty, wouldn't he see that more wealth is the solution - not the problem? Even semi-capitalism has brought untold wealth and prosperity so much so that even the definition of poverty has radically changed [1]. For example, what does being poor today mean relative to what being poor was one hundred or two hundred years ago much less in the pre-industrial age? If he was truly concerned, wouldn't he argue for more freedom? Wouldn't more freedom allow those born into difficult circumstances to offer their labor for less than otherwise and allow more to gain employment? Wouldn't more freedom reduce costs and regulations and thereby allow employers to hire more people? Wouldn't more freedom increase productivity and increase real wages so much that being poor might mean only having three houses and 4 cars? In other words, if this writer is truly concerned with the poor - he should advocate individual rights and capitalism which leads to prosperity and economic growth. Instead, he argues implicitly for more government controls and statism which logically lead to misery and stagnation for everybody - not just the "poor" - as is clearly obvious when observing the government's education monopoly.

He argues that these "condemned" persons have "no security and therefore no freedom to take risks". In a free society, any one is free to produce, trade, and take whatever "risk" they deem to be in their self-interest. There is no guarantee - that is why it is called risk. If he had "security", why would he need to take "risk"? This is an outright contradiction. Of course, what he is actually calling for is not the "freedom to take risks" but the right to an outcome which is what he means by "security". By what right does anyone demand "security"? Where in nature is there a guarantee of "security"? Such a claim begs the question "provided by whom?" One can not claim the right to violate another's rights.

He then turns to economic empiricism to justify a claim that is prima facie ridiculous and morally offensive - the claim that "higher tax rates don't reduce productivity." First, note the sentiment - "we can steal as much as we want from these guys - they'll keep working..." Second, consider the economic argument. Let's see - say every day you go to work and at the end of the day a criminal stands outside the door and takes 90% of what you just made. How many hours would you be willing to work under those circumstances? Under these circumstances, how motivated would an entrepreneur be to take risks, innovate, and make capital investments if his return is practically nothing? Furthermore, say the criminal takes the money and consumes it so that rather than paying your bills and saving the extra, i.e., reinvesting into productive assets, the money is stolen and simply wasted. This represents a massive loss of potential productivity. On top of this, there are losses due to compliance since smart people must be employed to administer the compliance and decipher the byzantine tax code [2]. Magnify this by billions and trillions. Do I have to go on?

The offering of such an argument is a consequence of the total bankruptcy of the modern social sciences. Here again, we can see the effect of the rejection of reason and principles. Those not able to think in principle or who reject principled arguments outright, turn to empiricism, i.e., the analysis of quantitative data independent of concepts. Virtually the entire field of economics today is mired in empiricism. Accordingly, anyone can claim anything as long as they have a statistical analysis that offers some validity. This approach is so rampant that someone can apparently publish a paper claiming that the government can confiscate arbitrary amounts of income with no effect on productivity.

He ends with a fitting claim:

In other words, they're trying to get people to punish themselves and punish society at the same time.

In fact, going "Galt" means the exact opposite. Going Galt means recognizing that a man has the right to his own life and the right to exist for his own sake. If a slave stops supporting his masters he is liberating himself - not punishing himself. Society is simply a sum of individuals and has no actual identity, but, in this context, if the writer is implying that "society" are those who depend on the producers for their existence - society had better start taking these people seriously.

In essence, these bullet points provide a concise summary of everything that is wrong with the world today.

The nationalization of Cargill represents a further front in the global drive towards socialism and fascism.

The second bullet point demonstrates the practical economic effects of socialism and shows how it leads inexorably to tyranny. Of course, nationalization is outright theft and requires violence or the threat of violence.

The effect of price controls is effectively theft since it takes away the right to dispose of property as the owner sees fit. If the state can tell you at what price to sell your property - it is not your property by definition. Since price controls logically must lead to shortages, people will attempt to violate the governments controls by selling on a black market. The government must then either relax the controls or be prepared to enforce the laws by ever increasing forms of violence. In this way, price controls must lead to tyranny. In every period of world history from Ancient Rome to the French Revolution to Soviet Russia to Chavez' Venezuela you can observe this effect [1].

The third bullet point represents the concept of "democracy" versus the principle of individual rights. Democracy represents "unlimited majority rule" and amounts to mobocracy. It is the idea that anything can be done to anybody as long as you have 51% of the vote. Democracy means rule by consensus rather than rule by law. The principle of individual rights as embodied in the Declaration of Independence means that each person has unalienable rights, i.e., they possess certain freedoms by virtue of their nature as human beings that are not to be violated under any circumstances. The right to think or speak freely is not something that can be taken away by majority vote. The right to own property is a precondition of human survival since if you can not dispose of your own property you are a slave by definition. America began as a constitutional republic and we have devolved into a democracy in which there are no rights which can not be violated by majority rule. This rule by consensus versus rule of law is a further consequence of modern philosophy, i.e., subjectivism and pragmatism.

The fourth bullet point represents the "sanction of the victim". In Atlas Shrugged, Ayn Rand showed that evil can exist only so long as the victims allow it. Cargill should either hire a private army to fight the Venezuelan government (since the United States will not fight for American property owners) or blow up its factory, i.e., "Go Galt" on it (as a recent refrain goes). Instead they engage in cowardly, appeasement.

"I warn you this revolution means business," said Chavez, whose government has struggled with lower oil income and minor food shortages this year.

The looters do mean business. It is time that the producers mean it to.

Thursday, March 5, 2009

WASHINGTON – President Barack Obama said the consensus from the White House health care summit is that there is an immediate need for health care reform, and signaled that he's open to compromise on Thursday.

Obama told participants at the end of a health summit that although he offered a plan during last year's campaign, he isn't wedded to that proposal. He told Republicans and Democrats, doctors and insurers — "I just want to figure out what works."

Seriously, this is becoming too easy. I have said over and over that Obama's essential philosophy is pragmatism. He is, in fact, a gross caricature of the philosophy of pragmatism. The above is a stunning example.

Since pragmatism holds that nothing is true and nothing can be proved absolutely (except of course the that absolutely nothing is true), the pragmatist must first seek consensus from others since he is unable to reach any independent conclusion. Since he rejects absolutes, he not only dismisses principles held by others but can not even firmly believe his own "hypotheses". Therefore, he openly seeks compromise and is willing to negotiate on anything. Who knows if one idea is right or wrong, just act and see what happens. There is no good or bad - let's negotiate, seek consensus, compromise, get something or anything done.

In this case, Obama is not even sure he is right. The consensus said there is need of health care reform so let's do it, but, to be sure, he is still open to compromise. He just wants to figure out what "works." This is his pattern on every issue not just health care. He forms a consensus from "experts", is willing to negotiate anything, and then acts. In fact, as we are now discovering, he brings a teleprompter wherever he goes. In other words, he appears unable to speak without a complete and literal rendering of the words which he is to utter.

In the Declaration of Independence, Jefferson was able to offer the principle of unalienable rights thus enabling one to deduce concrete applications to an almost infinite variety of political questions. Over two hundred years of modern philosophy later, we now are observing the spectacle of a president who is so unprincipled (on principle) that he is unable to deal with virtually any concrete and is reduced to simply parroting words placed in front of him.

I can't help quoting Ayn Rand on pragmatism:

[The Pragmatists] declared that philosophy must be practical and that practicality consists of dispensing with all absolute principles and standards—that there is no such thing as objective reality or permanent truth—that truth is that which works, and its validity can be judged only by its consequences—that no facts can be known with certainty in advance, and anything may be tried by rule-of-thumb—that reality is not firm, but fluid and “indeterminate,” that there is no such thing as a distinction between an external world and a consciousness (between the perceived and the perceiver), there is only an undifferentiated package-deal labeled “experience,” and whatever one wishes to be true, is true, whatever one wishes to exist, does exist, provided it works or makes one feel better.

A later school of more Kantian Pragmatists amended this philosophy as follows. If there is no such thing as an objective reality, men’s metaphysical choice is whether the selfish, dictatorial whims of an individual or the democratic whims of a collective are to shape that plastic goo which the ignorant call “reality,” therefore this school decided that objectivity consists of collective subjectivism—that knowledge is to be gained by means of public polls among special elites of “competent investigators” who can “predict and control” reality—that whatever people wish to be true, is true, whatever people wish to exist, does exist, and anyone who holds any firm convictions of his own is an arbitrary, mystic dogmatist, since reality is indeterminate and people determine its actual nature.

Quote of the Month

“We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” -- Ayn Rand